The Voice of Business for Long Beach

The Third Sector Report By Jeffrey Wilcox

The Economic Cliff: A View From The Edge

December 4th, 2012 – There’s no doubt about it, we’re all watching the landscape unfold beneath us from the edge of the economic cliff. In one of the most uncertain times in our fiscal history, most of us don’t know whether we’ll fall off, be pushed over, or pulled from the cliff’s edge as a train of economic measures that are set to expire, modify or launch rumbles past each of us on New Year’s Day.

Given the nation’s deficit, the economic cliff is a steep one. And, there are scores of scenarios foretelling how individuals, businesses and government could end up as the nation teeters between managing a recession and hitting a debt ceiling.

Among the laws that are set to change with the calendar are ending last year’s temporary payroll tax cuts, stopping certain tax breaks for businesses, recalculating alternative minimum tax, narrowing unemployment eligibility, imposing new taxes approved as part of healthcare reform, and forcing an automatic $54.6 billion reduction for domestic programs with an equal decrease in military spending.

If you are one of the nearly 14 million Americans who are employed by nonprofit organizations or are one of the more than 60 million men and women who serve on boards or volunteer to advance the third sector, there’s a sobering recognition that the economic cliff goes well beyond “what does this mean for me.”

Resting on the cliff is a potential $2 billion loss in rental assistance programs, $1.3 billion less for basic education programs, $1 billion wiped out for special education, $600 million in reductions for Head Start, and $187 million less for child care and early childhood education programs. Sadly, that’s just the tip of the iceberg for nearly 1,000 government departments and programs slated for some form of amputation.

Whether the vantage point from the cliff is for-profit or not, we know something has to give, something has to change, and something needs to be done. We also know, whether red or blue, the cast of characters in Washington can’t afford for the new season to look like a rerun of the last one.

Whatever the outcome of the debate, there are three key factors about the nonprofit sector that policy-makers, community leaders and tax-paying citizens have got to keep in mind in order for communities to be in a position to respond to its citizens in the face of economic desperation. The first factor is respecting the charitable deduction. This is not the time to create disincentives for citizens to contribute to the welfare of others when the welfare of so many is at stake.

The second factor is putting fewer restrictions on what dollars are going to be available to nonprofit organizations. Nonprofit organizations, like any business, must have dollars to cover their overhead, which means funding quality, quantity, competence and safety. This is not the time to needlessly tie the hands of organizations that will be outstretched to help others.

The third factor is demonstrating the concept of leveraged resources. The wall between managers of public dollars and private funds must come down with both seated at the same decision-making table to work out a shared proposition to maximize the use of the limited resources that both possess. This is not the time to pay lip service to “private-public partnerships” that continue to treat nonprofits like children with an allowance and holding them accountable to parents with conflicting pocketbooks.

In the days ahead, men and women with an unwavering loyalty to their favorite causes will be advocating for their share of the diminishing pie. The greatest challenge will be for these efforts to not portray The Third Sector as a special interest group operating from places of entitlement, whining and victimization. This is the time to make arguments about the impact of economic and tax law on communities rather than specific organizations or populations.

There’s no doubt we’re all standing on the economic cliff. We are also standing on the threshold of having to redefine how government, communities and nonprofit organizations must regroup and restructure in order to advance a community’s quality of life. It’s too bad we didn’t work out that cliffhanger before we reached the cliff itself.

(Jeffrey R. Wilcox, CFRE, is president and chief executive officer of The Third Sector Company, Inc. Join in on the conversation about this article on Facebook or drop us a line at jwilcox@thirdsectorcompany.com)